Mimecast (NASDAQ:MIME) Q2 Sales Beat Estimates

Adam Hejl /
2021/11/02 7:50 am EDT
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Email monitoring and security company Mimecast (NASDAQ:MIME) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 20% year on year to $147.2 million. Guidance for next quarter's revenue was $149.9 million at the midpoint, 2.6% above the average of analyst estimates. Mimecast made a GAAP profit of $17.5 million, improving on its profit of $10 million, in the same quarter last year.

Is now the time to buy Mimecast? Access our full analysis of the earnings results here, it's free.

Mimecast (MIME) Q2 FY2022 Highlights:

  • Revenue: $147.2 million vs analyst estimates of $142.8 million (3.08% beat)
  • EPS (non-GAAP): $0.40 vs analyst estimates of $0.34 (19.4% beat)
  • Revenue guidance for Q3 2022 is $149.9 million at the midpoint, above analyst estimates of $146.1 million
  • The company lifted revenue guidance for the full year, from $580 million to $591.7 million at the midpoint, a 2.01% increase
  • Free cash flow of $31.1 million, roughly flat from previous quarter
  • Net Revenue Retention Rate: 106%, in line with previous quarter
  • Customers: 39,600, down from 40,600 in previous quarter
  • Gross Margin (GAAP): 77.2%, up from 75.7% same quarter last year

Peter Bauer, chief executive officer of Mimecast, said, “Our results exceeded the high end of our guidance ranges across all metrics and reflect our success executing our three-pronged growth strategy. We drove sequential improvement in net revenue retention and average order value per customer due to our success delighting customers and their desire to deploy additional services.”

Founded in London by South Africans Peter Bauer and Neil Murray, Mimecast (NASDAQ:MIME) provides cloud-based filtering service for securing business email accounts.

The rise of criminal and state sponsored cyber attacks means that more companies should are in a situation where they need to be responding to the threat of ransomware or phishing (where employees are tricked into sharing sensitive information). Email often serves as a gateway into successfully planting malware onto a company’s network and that drives demand for cybersecurity solutions that can help keep it safe.

Sales Growth

As you can see below, Mimecast's revenue growth has been decent over the last year, growing from quarterly revenue of $122.6 million, to $147.2 million.

Mimecast Total Revenue

This quarter, Mimecast's quarterly revenue was once again up a very solid 20% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $4.68 million in Q2, compared to $8.65 million in Q1 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 11.4% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Mimecast. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Mimecast Net Revenue Retention Rate

Mimecast's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 106% in Q2. That means even if they didn't win any new customers, Mimecast would have grown its revenue 6% year on year. That is a decent retention rate and it shows us that not only Mimecast's customers stick around but at least some of them get increasing value from its software over time.

Key Takeaways from Mimecast's Q2 Results

With a market capitalization of $4.97 billion Mimecast is among smaller companies, but its more than $366.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

Mimecast' revenue guidance for the next quarter looks quite a bit better than what the analysts were expecting. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see the slowdown in customer growth, with Mimecast losing 1,000 customers this quarter according to their report. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But investors might have been expecting more and the company is down 1.39% on the results and currently trades at $74 per share.

Should you invest in Mimecast right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.